The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions

September 25, 2014

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Format: Chicago

Eugenio M Cerutti, and Stijn Claessens. The Great Cross-Border Bank Deleveraging: Supply Constraints and Intra-Group Frictions, (USA: International Monetary Fund, 2014) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

International banks greatly reduced their direct cross-border and local affiliates’ lending as the global financial crisis strained balance sheets, lowered borrower demand, and changed government policies. Using bilateral, lender-borrower countrydata and controlling for credit demand, we show that reductions largely varied in line with markets’ prior assessments of banks’ vulnerabilities, with banks’ financial statement variables and lender-borrower country characteristics playing minor roles. We find evidence that moving resources within banking groups became more restricted as drivers of reductions in direct cross-border loans differ from those for local affiliates’ lending, especially for impaired banking systems. Home bias induced by government interventions, however, affected both equally.

Subject: Bank credit, Banking, Commercial banks, Cross-border banking, Financial institutions, Financial services, Financial statements, Foreign banks, Money, Public financial management (PFM)

Keywords: Affiliate lending, Asia and Pacific, Bank credit, Borrower country, Borrower Fe, Commercial banks, Credit supply, Cross-border banking, Cross-border lending, Deleveraging, Financial crisis, Financial statements, Foreign banks, Global, Global banks, International capital markets, Lender-borrower characteristic, North America, WP

Publication Details

Pages:

38
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/180
Stock No:

WPIEA2014180
ISBN:

9781498354783
ISSN:

1018-5941

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